Postmates buoyed by $141 million as startup funding gets tougher

The co-founder and CEO of Postmates was trying to pitch his San Francisco food delivery business to investors, just as venture capitalists were tightening their belts and cash-burning delivery startups were falling out of favor globally.

The San Francisco VC firm, co-founded by billionaire Peter Thiel, was already an investor, but agreed to step up its support and add partner Brian Singerman to the board of directors.

Not only does its app compete with decades-old courier services and the restaurants themselves, it faces a bevy of other companies that have piled into the on-demand food delivery industry in recent years.

Postmates hired Qatalyst Partners, a boutique investment bank, to help with fundraising this year and explore a possible sale, according to a person familiar with the matter.

Preliminary discussions were held with potential acquirers, including Amazon and Uber, but no deal materialized, said the person, who asked not to be identified because the talks were private.

Square Inc. has tried unsuccessfully to sell its Caviar food delivery arm and retreated from a few markets.

Munchery, which cooks and delivers its own food, is said to be struggling to put together a fundraising round, has discussed selling shares at a discount to its previous round and is looking to replace its founding CEO.

DoorDash, probably the closest competitor to Postmates, sold shares this year at a lower price than its prior funding round after initially seeking a $1 billion valuation.

“What you have here is a lot of super over-funded competition for a fundamentally big market that’s a lot smaller than people think,” said Max Wolff, chief economist at Manhattan Venture Partners, which specializes in private stock transactions.